Ally Financial Buying Cardworks for $2.65 Billion

Ally Financial, a banking company that is a major provider of auto loans and operates online bank Ally, has agreed to buy CardWorks in a deal valued at approximately $2.65 billion. CardWorks is based in Woodbury, NY and is a privately held company with $4.7 billion in assets and $2.9 billion in deposits. Under the terms of the agreement, Merrick Bank, a wholly owned subsidiary of CardWorks, Inc., will merge into Ally Bank.

CardWorks is a leading non-prime credit card issuer that ranks among the top 20-card issuers in the U.S. It also provides consumer service lending and merchant services.

The Ally deal will include $1.35 billion of cash and $1.30 billion in Ally common stock, or 39.5 million shares.

The acquisition of CardWorks will diversify Ally’s product offerings, adding an established credit card platform, full-spectrum servicing and recovery operation and a nationwide merchant acquiring business. These additional capabilities immediately enhance Ally’s direct bank deposit and consumer product platform and complement the company’s auto finance, insurance, and commercial product lines. Upon completion of the transaction, Ally will provide over 11 million customers in all 50 states with compelling secured and unsecured banking products.

CardWorks is a privately held company headquartered in Woodbury with facilities in Florida, Utah and Pennsylvania.

“CardWorks represents an industry-leading credit card platform in the U.S., and this acquisition serves as an important milestone in Ally’s evolution to be a full-service financial provider for our customers,” said Ally Chief Executive Officer Jeffrey J. Brown. “I have tremendous admiration for the three decades of leadership Don Berman has provided as founder and CEO and remain impressed with what the entire team has accomplished in building a resilient, growing business with a commitment to the customer. Beyond the compelling strategic rationale and financial enhancements this transaction brings, CardWorks is an ideal cultural fit for Ally. Both companies share a deep-rooted history of disciplined risk management and an obsession over the customer. I’m thrilled to welcome CardWorks to the Ally team and look forward to adding value for all of our stakeholders.”

Don Berman, Chairman, Chief Executive Officer and Founder of CardWorks, owns 70% of CardWorks and will receive a combination of cash and Ally common stock as his consideration. Shares of Ally common stock granted to Mr. Berman will be subject to a lock-up agreement restricting the sale or transfer of 100% of his shares until the one-year anniversary of the closing date, at which point Mr. Berman can sell or transfer up to one-third of his shares. On each subsequent anniversary, Mr. Berman will be permitted to sell or transfer up to another one-third of his shares. As a result, three years after close of the transaction, Mr. Berman may sell or transfer any remaining shares of Ally common stock.  Mr. Berman will join Ally’s Board of Directors and become a member of Ally’s executive management team following closing.

“I’m incredibly excited for this next chapter of CardWorks,” said Berman. “Ally has built an industry-leading online banking franchise while simultaneously re-affirming the market leading positions of its auto finance and insurance businesses. At CardWorks, we’ve successfully built a people-centric, compliance-focused organization enabled by technology with a mission to delight our clients and customers, and Ally represents an ideal partner. In leveraging Ally’s commitment to innovation and adaptiveness, the combined company will be well positioned to meet the financial needs of our ever-growing customer base and deliver sustainable growth and performance. Importantly, Ally’s inclusive and purpose-driven culture represents an important shared value between the two companies. I’m energized by the opportunity the combination of these two great businesses will provide to our customers and employees.”

Goldman Sachs served as financial advisor and Sullivan & Cromwell served as legal counsel to Ally in this. Wachtell, Lipton, Rosen & Katz served as legal counsel to CardWorks in this transaction.